South Africa’s June consumer price index excluding mortgage changes (CPIX), which is used by the South African Reserve Bank (SARB) for its inflation target, is expected to ease to a median of 6,7% y/y from May’s 7,7% y/y and April’s 8,5% y/y.
The range of forecasts is from 6,5% y/y to 7,3% y/y. Statistics South Africa (Stats SA) will release the June consumer inflation data at 11:30am local time on July 29.
One of the main reasons for the easing in the consumer inflation rate is base effects, as the y/y change will now be measured from the peak of the rand’s weakness. The rand has been strengthening for more than 500 days after it hit a record worst level of R13,86/$ on December 20 2001. On April 30 it reached a 30-month best level of R7,05/$.
The main inflationary ”swing” factor is expected to come from food prices, which should fall into single-digit y/y increases. Food at the consumer inflation level peaked at 19,8% y/y in October, but then eased to 18,4% y/y in November, 16,1% y/y in December, 15,5% y/y in January, 14,2% y/y in February, only 12,4% y/y in March, 11,6% y/y in April and 11,0% y/y in May.
The optimists believe that the start of the summer rainfall saw a drop in fresh vegetable and fruit prices, while the pessimists believe that the full effects of earlier grain price rises have still to feed through to the consumer level. Retailers are under pressure from millers to pass on the recent reduction in milled grain products to consumers.
The other main factor leading to lower inflation is a 27c/l (7%) drop in the retail petrol price, as well as a 40c/l (11,8%) decline in the wholesale price of diesel.
The median forecast for the headline June consumer price index (CPI) is 7,0% y/y, with the range of forecasts varying from a high of 7,5% y/y to a low of 6,7% y/y. In May it was 7,8% y/y and in April it was 8,8% y/y.
The survey shows the core consumer inflation rate has a range of 6,0% y/y to 6,7% y/y with a median of 6,3% y/y. In May core inflation was 6,9% y/y and in April it was 8,2% y/y. – I-Net Bridge